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Economics of Energy & Environmental Policy
Volume 12, Number 1

Changes in Electricity Use following COVID-19 Stay-at-home Behavior

Dylan Brewer

DOI: 10.5547/2160-5890.12.1.dbre
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This article uses hourly electricity consumption data from the PJM Interconnection in the United States and stay-at-home metrics from cell phone location data to study the effect of the COVID-19 pandemic on electricity consumption using a difference-in-predicted-differences strategy. I show that while in the first months of the COVID-19 pandemic total electricity consumption declined by 2.7–3.8% relative to a predicted counterfactual, in June through August 2020 electricity consumption was 2.1–3.5% higher than the predicted counterfactual. Time spent at home reduces electricity consumption, and a reduction in time at home after May lead to increased electricity consumption in the summer months. In addition, higher temperatures had an increased effect on electricity consumption in 2020 relative to previous years. Nationwide monthly data on electricity consumption by load class reveals that commercial and industrial consumption was below its expected baseline from March-December 2020, while residential consumption was above its expected baseline, peaking in July. This suggests that increased demand for residential cooling offset declines in commercial and industrial demand for electricity. Estimates of the total effect of the pandemic on electricity consumption from March through December 2020 suggest that early reductions in electricity use were offset by later increases, implying that any expected "silver lining" of decreased emissions from electricity generation may be smaller than previously thought.

Differential Impact of COVID-19 on the Energy Consumption of Residential and Business Sectors

Pedro I. Hancevic and Hector H. Sandoval

DOI: 10.5547/2160-5890.12.1.phan
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As a consequence of the COVID-19 pandemic, some patterns of energy consumption changed in the residential and non-residential sectors. This paper uses data from a local utility company in Florida to quantify the heterogeneous impacts of the pandemic on electricity and natural gas consumption across households from different income levels and across essential and non-essential businesses. We found significant increases in the average residential electricity consumption during the lockdown and subsequent reopening phases, which translate into higher cost for households. We found that natural gas consumption dropped abruptly in the business sector and also important differences between the electricity consumption of essential and non-essential businesses, with the former consuming more and the latter less electricity.

Cheap Money, Geopolitics and Supernormal Backwardation of the WTI Forward Curve

Mahmoud A. El-Gamal, Amy M. Jaffe, and Kenneth B. Medlock III

DOI: 10.5547/2160-5890.12.1.melg
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Financial speculators frequently trade in the most liquid short-tenor contracts. We study repeating patterns of sharply steepening slopes in the WTI forward curve to investigate whether, after controlling for macroeconomic variables, physical market fundamentals, and basic arbitrage, calendar spread behavior is partly explained by speculation related to assessed geopolitical risk. We estimate WTI forward curve backwardation using the slope component from the parsimonious Dynamic Nelson-Siegel factor model, and then regress the resulting time series on a variety of economic, financial, and geopolitical variables. Results show that geopolitical risk in juxtaposition with low interest rates explains a significant percentage of the slope variation from 2011 to 2021. We then investigate whether there is evidence to support the common narrative that speculators buy the geopolitical threat and sell the event. We find confirmation of the hypothesis. We further study the dynamic effects of interest rate and geopolitical risk on speculative activity using a Factor-Augmented Vector Autoregression analysis. Impulse response functions from the latter indicate that independent shocks related to geopolitical threat result in heightened supernormal backwardation for a month or more. We recommend changing margin requirements in WTI futures markets in light of these findings to disincentivize this speculative behavior.

Energy Network Innovation for Green Transition: Economic Issues and Regulatory Options

Tooraj Jamasb, Manuel Llorca, Leonardo Meeus, and Tim Schittekatte

DOI: 10.5547/2160-5890.12.1.tjam
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In this age of multiple economic challenges and stimulus packages, is it a good time to heavily invest in tomorrow's energy networks and research infrastructure? The academic literature widely acknowledges that innovation is key to decarbonising the energy sector and fostering sustainable development. However, R&D and innovation have not been strongly promoted following the liberalisation of the energy sector. Is this a case of business, regulatory, or policy failure, or are there other factors involved? In this paper, we suggest reasons for the slow uptake of new technologies in energy networks and discuss some remedies for the European context, where innovation in the area of energy networks is crucial for the implementation of the Green Transition. The solutions to address this shortfall need to be considered in an overarching manner. The specific points raised are with reference to incentive regulation, the establishment of competitive funding models like Ofgem's Low Carbon Network Fund, and a large European collaborative research hub.

Who Knows What: Information Barriers to Efficient DER Roll-out in the U.S.

Sylwia Bialek, Yury Dvorkin, Jip Kim, and Burçin Ünel

DOI: 10.5547/2160-5890.12.1.sbia
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Distributed Energy Resources (DERs) are increasingly popular. Their relevance to the functioning of energy systems and emissions reduction has spurred a flurry of policy discussions and research into the measures needed to facilitate integration of these resources. However, the majority of that work focuses on systems characterized by complete and perfect information, while in reality, there are multiple information barriers to efficient DER roll-out. In this paper, we study the prevalence and relevance of information issues arising in DER deployment in the U.S. We do that by analyzing DER-related regulatory proceedings, surveying the relevant electricity sector stakeholders, and reviewing the existing engineering and economic literature on distributed resources. Within the range of identified issues, most of which relate to utilities, we analyze four issues in greater detail: consumer information, interconnection information, the value of non-wire alternatives, and DER remuneration. We then outline some of the policies necessary to ensure efficient DER roll-out.

Who's Responsible for Climate Change? New Evidence Based on Country-level Estimates of Climate Debt

Benedict Clements, Sanjeev Gupta, and Jianhong Liu

DOI: 10.5547/2160-5890.12.1.bcle
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In this paper we discuss the concept of climate debt, which measures the cumulative economic damages due to CO2 emissions. We find that the climate debt (estimated for 131 countries) is extremely large, equaling some $59 trillion over the 1959–2018 period. Climate debt is also substantial relative to other government liabilities; in the G-20, it equals about 81 percent of GDP. Looking forward to 2035, cumulative climate debt will rise another $80 trillion. Among the biggest emitters, climate debt per capita is the highest in the United States and 6 times as high as that of China (and 25 times as high as that of India). Recent pledges to reduce emissions (such as those in countries' Nationally Determined Contributions, or NDCs) would still leave the advanced economies with high levels of climate debt per capita relative to the developing world. Reducing emissions to meet the Paris targets needed to limit temperature increases would more significantly reduce climate debt but would be difficult to attain in a fair manner. Given the fiscal pressures countries face from high levels of debt and rising age-related spending, countries could turn to greater taxation of energy with carbon taxes to help reduce climate debt.

Vehicle-to-grid Policy in South Africa: State-led v. Market-directed Approaches

Fadiel Ahjum and Andrew Lawrence

DOI: 10.5547/2160-5890.12.1.fahj
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The Vehicle-to-Grid (V2G) policy aim has been widely analyzed in policy planning literature but has not been explored for adaptation to African contexts. African countries enjoy immense renewable energy (RE) potential but currently experience minimal electric vehicle usage, since most drivers confront limited charging station access and thus range anxiety. One potential workaround surmounting this obstacle in the short term is to promote V2G charging infrastructure for a subset of vehicles with fixed, shorter-range routes: minibus commuter taxis. This study therefore uses the South African energy-systems general-equilibrium (SATIMGE) linked model in an exploratory analysis of a V2G policy for South Africa's minibus taxi industry, which, when electrified, would combine optimal charging times for eTransport with their off-take of electricity at periods of system-wide or local peak demand. This in turn would facilitate several publicly beneficial outcomes.  Adequate implementation requires however that network augmentation costs are addressed along with the provision of flexible charging infrastructure. From the perspective of maximizing generation capacity (and thus, over time, maximizing the proportion of RE generation capacity), the modelling finds that the most preferable scenario would be V2G without controlled charging stipulations (i.e. opportunistic charging influenced by electricity prices subject to network demand). The second most preferable provides additional charging infrastructure capital expenditure and includes controlled charging stipulations but excludes minibus V2G; then minibus V2G including provision of additional charging infrastructure capital expenditure, with business-as-usual being the least preferable. However, this ranked outcome excludes consideration of several additional variables that could realize additional public goods, discussed in the conclusion.

The (indirect) Effects of Windfall Funds on Sustainability Behavior: Insights for Carbon Fee Dividends

Shana M. McDermott and Caroline L. Noblet

DOI: 10.5547/2160-5890.12.1.smcd
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Motivated by proposed Carbon Dividend legislation in the U.S., we test the impacts of a monetary windfall on sustainability behavior under information conditions about the source of the funds. We find that windfall funds, particularly when presented as a refund, positively impact stated intent to engage in transportation-related sustainable behaviors. Evidence suggests that participants are sensitive to compensation amounts, where a higher compensation amount led to a higher rate of sustainable behavior intention. We also find a small positive spillover effect from individuals who intend to spend the windfall on transportation-related activities and their stated future sustainable behavior, although results are driven by differences across participants' source of environmental motivation. Socio-demographics may partially explain this result. A connection to the environment, either through previous donations or employment, or a belief in human-induced climate change, produced higher declarations for pro-environmental behavior. Our results provide important insights into the indirect behavioral effects of a (carbon fee) dividend, and provide avenues for future research.

Do Investments in Clean Technologies Reduce Production Costs? Insights from the Literature

Govinda R. Timilsina and Sunil Malla

DOI: 10.5547/2160-5890.12.1.gtim
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In response to growing environmental concerns, governments have encouraged innovation and adoption of green or clean technologies through various policy measures. At present more than half a trillion US$ is being invested annually in clean technologies. This study analyzes if investments in clean technologies increase productivity and reduce production costs based on the existing literature. The findings are, however, mixed. Most ex-post studies show a positive relationship between clean investments and energy-intensive manufacturing firms' productivity. In transportation, buildings, and power sectors, empirical evidence between the adoption of clean technologies and the cost of energy services is highly limited. Ex-ante studies find cleaner vehicles that use electricity or hydrogen are still more expensive than gasoline and diesel vehicles, while in the buildings sector, clean technologies reduce the cost of energy services. In the power sector, increased investments in renewable energy have not yet decreased the average costs of grid electricity supply.

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